Madoff Accountant To Plead Guilty, Cooperate With Probe

Nov 2 2009 | 1:25am ET

Bernard Madoff’s accountant has struck a deal with federal prosecutors, admitting that he played a role in the $65 billion Ponzi scheme.

Authorities first suspected David Friehling of little more than not doing his job, signing off on financial statements without actually doing the accounting legwork.  Charged in March with only securities fraud, Friehling is set to plead guilty to seven counts, including securities and investment adviser fraud, as well as obstructing tax law administration and making false filings to the Securities and Exchange Commission, prosecutors told U.S. District Judge Alvin Hellerstein on Friday.

Friehling is also cooperating with the government investigation into the Madoff probe, the prosecutors told the judge. The government is also demanding that the account forfeit all of his profits from the fraud, from the early 1990s until last year.

Madoff’s use of Friehling’s firm, Friehling & Horowitz, is often cited as one of the biggest red flags in the Madoff case. The firm operated out of storefront office in a strip mall in the northern New York City suburb of New City, N.Y. Friehling was the only principal of the firm—his father-in-law, Jerome Horowitz, has been retired for more than a decade—and had told the American Institute of Certified Public Accountants that he had stopped conducting audits.

The criminal information against Friehling is set to be unsealed on Tuesday. He is the third person, after Madoff himself and Madoff’s chief financial officer, Frank DiPascali. Friehling faces up to 100 years in prison, although he obviously hopes his cooperation wins him a lesser tariff.

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